Fortune innovation imeme6/2/2023 ![]() It all started in the early 2010s with the first alternative coins (or “altcoins”) that were introduced to compete with Bitcoin, and with an abundance of what looked to be objective, market-driven metrics. The Problem with Crypto Prices and Related Metrics ![]() ![]() For crypto to truly go mainstream, the industry needs to stop blindly trusting these metrics of convenience and pay more attention to dimensions that closely track progress against actual consumer and business needs. These metrics have distorted the incentives of well-meaning crypto entrepreneurs, and made it easier for bad actors to blend in, attract capital, and generate hype around their scams. For the crypto industry to have a positive impact on society, we need to first overhaul how it measures progress - and success.įrom inception, crypto participants have obsessed about the price, market capitalization, and trading volume of competing coins. It would not, however, change the underlying incentives in the space and stop some of the reckless and fraudulent behavior it has attracted to date. It would definitively improve consumer protection and market integrity. But a regulatory framework that is purpose-built for the technology would only tackle part of the problem. The idea is that if we regulated crypto players like traditional financial institutions, they would start behaving like ones. Now, they offer very different lessons.Īfter each high-profile crypto meltdown, there have been renewed calls for greater oversight of the space. Only 12 months ago, many of these companies were lauded as examples of how vision, bold thinking, and audacity could build multi-billion dollar empires overnight. At year-end, there were questions about FTX’s onetime rival Binance, which has been confronted with large-scale customer withdrawals and criminal investigations over its compliance practices. Before FTX collapsed in November, there was the meltdown of stablecoin Terra and its companion coin LUNA, as well as the related implosions of crypto lender Celsius, crypto broker Voyager Digital, and hedge fund Three Arrows Capital, to name a few of the most dramatic failures. “That’s certainly, I think, a starting place for what we’re working on this year,” Hill told Fortune.The events of 2022 have called into question whether crypto will (or should) survive. While Hill did not explicitly endorse the provision, he said it was the direction of a bipartisan draft led by then–ranking member Patrick McHenry (R-N.C.) and chair Maxine Waters (D-Calif.) last fall. Under this scenario, Circle would work directly with the Federal Reserve rather than having to partner with a bank like SVB. Specifically, he pointed to a proposed provision-already adopted by several countries, including Singapore, Japan, and the United Kingdom-where the central bank would have direct oversight and stablecoin issuers could custody dollar deposits with the central bank. “We have the most conservative reserves on the planet, but a bank introduced risk to Circle over the weekend,” Disparte told Fortune. After traders realized Circle had exposure to SVB on Friday-which the company later revealed to be 8% of its reserves-its USDC token, meant to maintain a $1 peg, plunged below 90 cents across exchanges until banking regulators announced on Sunday night that deposits would be protected.ĭante Disparte, Circle’s chief strategy officer, said regulation could have prevented the near catastrophe.
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